While the debate about corporate governance in the U.S. and U.K. is often more controversial, Nordic activist Accendo Capital has an unusual perspective on a system that prevents small investors from gaining outsize influence. Fund managers Henri Österlund and Mark Shay explained to Activist Insight Monthly what they like about the opportunity set in Northern Europe and how they can help companies grow.
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Slow activism
A Swedish activist explains to Activist Insight Monthly how it takes its time with campaigns and wouldn’t want small investors dominating the debate.
Accendo Capital, based in Luxembourg and Stockholm, prefers activism at a less breakneck pace. This activist hedge fund, which began investing in Finland and Sweden in 2008, compared the strategy in its home market to the U.S. during a recent visit to New York with some surprising observations.
Commensurate influence
“The corporate governance models in the Nordic countries are very competitive versus the U.S. – in many aspects, even better,” says Henri Österlund, Accendo’s founder.
Given the prevalence of two-tier boards, also common in many German-speaking countries in Europe, that may be an unexpected viewpoint for an activist. Management boards can be insulated from shareholders as a result of the two-tier structure, which allows a few large investors to dominate oversight of executives. Activists such as those that challenge U.S. companies with minimal stakes do not get the same hearing.
“In Sweden and Finland, what authority and credibility a shareholder has is clearly connected to their ownership stake. It should be this way here [in the U.S.],” says Mark Shay, Accendo’s senior partner. Annual elections and independent board chairs help keep shareholders in control of the company.
“That’s why the idea that someone with a 0.5% stake would launch an activist campaign in a Nordic small cap is unfathomable,” Shay says. “It’s a perfectly fine system to work within and it doesn’t lend itself to public
campaigns and proxy battles.”
Buy in to buyout
Accendo freely admits that it exists in an uncommon niche and that scale would be difficult to achieve for investors wanting to gather assets. It takes a private equity approach, derived from Österlund’s background. Shay’s experience as a consultant and equity analyst, and a third team member, Kai Tavakka’s roles in investment banking, round out the team.
“Part of our concept in terms of how we act as activists is rooted in the background of private equity,” Österlund says. “I think that the best thing that private equity gives to companies is that you have a clear owner that is dedicated to bring[ing] the company from A to B. A lot of listed companies have a very scattered shareholder base – no one takes care of the company, no one loves the company.”
Read the full interview here by Activist Insight
